PayPal’s released a new batch of User Agreements that includes a new “non-discouragement clause for sellers” that prevents them from talking down the service, plus price hikes a-plenty.The new new clause reads as follows:
“In representations to your customers or in public communications, you agree not to mischaracterize PayPal as a payment method. At all of your points of sale (in whatever form), you agree not to try to dissuade or inhibit your customers from using PayPal; and, if you enable your customers to pay you with PayPal, you agree to treat PayPal’s payment mark at least at par with other payment methods offered.”
“The attacker had merely called in to PayPal’s customer support, pretended to be me and was able to reset my password by providing nothing more than the last four digits of my Social Security number and the last four numbers of an old credit card account,” Krebs explained in a blog post.
The second of the two hacks happened even though PayPal had earlier promised to monitor the reporter’s account for suspicious activity following the first attack just hours before, said the reporter.
For several years PayPal has been trying to limit how much business it does with sites involved with copyright infringement. Unsurprisingly torrent sites are high up on the payment processors “do not touch” list.
For that reason it is quite rare to see PayPal offered as a donation method on the majority of public sites as these are spotted quite quickly and often shut down. It’s unclear whether PayPal does its own ‘scouting’ but the company is known to act upon complaints from copyright holders as part of the developing global “Follow the Money” anti-piracy strategy.
This week Andrew Sampson, the software developer behind new torrent search engine ‘Strike‘, discovered that when you have powerful enemies, bad things can happen.
With no advertising on the site, Sampson added his personal PayPal account in case anyone wanted to donate. Quickly coming to the conclusion that was probably a bad idea, Sampson removed the button and carried on as before. One month later PayPal contacted him with bad news.
“We are contacting you as we have received a report that your website https://getstrike.net is currently infringing upon the intellectual property of Motion Picture Association of America, Inc.,” PayPal began.
“Such infringement also violates PayPal’s Acceptable Use Policy. Therefore your account has been permanently limited.”
It isn’t clear why PayPal waited for a month after donations were removed from Strike to close Sampson’s six-year-old account but the coder believes that his public profile (he doesn’t hide his real identity) may have led to his issues.
“It seems someone at the MPAA realized I took donations using PayPal from some of my other LEGAL open source projects (like https://github.com/Codeusa/Borderless-Gaming) and was able to get the email of my account,” the dev told TF.
While Sampson had regularly been receiving donations from users of his other open source projects, he says he only received $200 from users of Strike, a small proportion of the $2,500 in his personal account when PayPal shut it down.
September last year the Digital Citizens Alliance and NetNames released a report that looked into the business models of “shadowy” file-storage sites.
Titled “Behind The Cyberlocker Door: A Report How Shadowy Cyberlockers Use Credit Card Companies to Make Millions,” the report offers insight into the money streams that end up at these alleged pirate sites.
The research claims that the sites in question are mostly used for copyright infringement. But while there are indeed many shadowy hosting services, many were surprised to see the Kim Dotcom-founded Mega.co.nz on there.
For entertainment industry groups the report offered an opportunity to put pressure on Visa and MasterCard. In doing so they received support from U.S. Senator Patrick Leahy, who was also the lead sponsor of the defunct controversial Protect IP Act (PIPA).
Senator Leahy wrote a letter to the credit card companies claiming that the sites mentioned in the report have “no legitimate purpose or activity,” hoping they would cut their connections to the mentioned sites.
Visa and MasterCard took these concerns to heart and pressed PayPal to cut off its services to Mega, which eventually happened late last month. Interestingly, PayPal cited Mega’s end-to-end-encryption as one of the key problems, as that would make it harder to see what files users store.
The PayPal ban has been a huge blow for Mega, both reputation-wise and financially. And the realization that the controversial NetNames report is one of the main facilitators of the problems is all the more frustrating.
TorrentFreak spoke with CEO Graham Gaylard, who previously characterized the report as “grossly untrue and highly defamatory,” to discuss whether Mega still intends to take steps against the UK-based NetNames for their accusations.
Initially, taking legal action against NetNames for defamation was difficult, as UK law requires the complaining party to show economic damage. However, after the PayPal ban this shouldn’t be hard to do.
Gaylard is traveling through Europe at the moment and he notes that possible repercussions against the damaging report are high on the agenda.
“Yes, I am here to see Mega’s London-based legal counsel to discuss the next steps in progressing the NetNames’ response,” Gaylard informs TF.
Mega’s CEO couldn’t release any details on a possible defamation lawsuit, but he stressed that his company will fiercely defend itself against smear campaigns.
“Mega has been operating, and continues to operate a completely legitimate and transparent business. Unfortunately now, with the blatant, obvious, political pressure and industry lobbying against Mega, Mega needs to defend itself and will now cease taking a passive stance,” Gaylard says.
According to the CEO Mega is running a perfectly legal business. The allegation that it’s a piracy haven is completely fabricated. Like any other storage provider, there is copyrighted content on Mega’s servers, but that’s a tiny fraction of the total stored.
To illustrate this, Gaylard mentions that they only receive a few hundred takedown notices per month. In addition, he notes more than 99.7% of the 18 million files that are uploaded per day are smaller than 20MB in size, not enough to share a movie or TV-show.
These statistics are certainly not the hallmark of a service with “no legitimate purpose or activity,” as was claimed.
While the PayPal ban is a major setback, Mega is still doing well in terms of growth. They have 15 million registered customers across 200 countries, and hundreds of thousands of new users join every month.
The world could really need a credible alternative to PayPal
There are way too many stories of Paypal unfairly and ridiculously cutting off services that rely on it as a payment mechanism, but here’s yet another one. Mega, the cloud storage provider that is perhaps well-known for being Kim Dotcom’s “comeback” act after the US government shut down Megaupload, has had its Paypal account cut off. The company claims that Paypal was pressured by Visa and Mastercard to cut it off:
Visa and MasterCard then pressured PayPal to cease providing payment services to MEGA.
MEGA provided extensive statistics and other evidence showing that MEGA’s business is legitimate and legally compliant. After discussions that appeared to satisfy PayPal’s queries, MEGA authorised PayPal to share that material with Visa and MasterCard. Eventually PayPal made a non-negotiable decision to immediately terminate services to MEGA. PayPal has apologised for this situation and confirmed that MEGA management are upstanding and acting in good faith. PayPal acknowledged that the business is legitimate, but advised that a key concern was that MEGA has a unique model with its end-to-end encryption which leads to “unknowability of what is on the platform”.
MEGA has demonstrated that it is as compliant with its legal obligations as USA cloud storage services operated by Google, Microsoft, Apple, Dropbox, Box, Spideroak etc, but PayPal has advised that MEGA’s “unique encryption model” presents an insurmountable difficulty.